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Neil Blumberg's KY Real Estate Blog

Buy, Sell, Invest in Louisville KY Real Estate www.Metro1Realty.com

By Neil Blumberg | Broker in Louisville, KY
  • New Protections from Lenders for Buyers, Home Owners and Sellers

    Posted Under: Home Buying in Louisville, Home Selling in Louisville, Foreclosure in Louisville  |  January 30, 2013 3:12 PM  |  249 views  |  No comments

    Stop2The Consumer Financial Protection Bureau (“CFPB”) has just made it tougher for lenders to take advantage of the consumers they've been mal treating for years. The new rules are major are a black eye for the well heeled mortgage industry and deal with 9 nine major topics:periodic billing statements, interest-rate adjustment notices for adjustable rate mortgages, prompt payment crediting and payoff statements, force-placed insurance, error resolution and information requests, general servicing, early intervention with delinquent borrowers, continuity of contact with delinquent borrowers, and loss mitigation procedures. These new rules will be particularly welcomed by homeowners facing foreclosure.

    Mortgage servicing companies were singled out for attention by the CFPB because they are the ones who, at the behest of the lenders, file and process the foreclosures against delinquent borrowers. These servicers generally buy from the lenders the right to collect payments from the borrowers. So whereas the lender loses money each time there is a foreclosure, short sale, late payment etc, for these servicing companies they are a source of profit. Sometimes the lender serves as its own processor. Under the new rules the mortgage serivcer will be prevented from extracting excessive late fees, prevented from foreclosing without completing the necessary paperwork, and will be compelled to change the terms of the home owners loan to prevent foreclosure or forced sale of their home. 

    Currently, even when a home owner is in the process of negotiating lower monthly mortgage payments through a loan modification, the servicers can file for foreclose on the borrower – that practice is now eliminated unless the Late-Payment-Fee-300x201borrower is 120 days or more late. And now the servicers must consider all alternatives to mitigate their losses, not just the easy ones or those favorable to the servicer. Now too the servicer is compelled to shed light on previously hidden issues: they are forced now to provide a comprehensible billing statement showing how much of the borrower's payment is allocated to principal, how much to interest and how much to fees.

    There is also relief for those borrowers with adjustable rate mortgages: the servicer must now give the borrower ample notice of the date when the rate will be adjusting and an estimate of that adjustment, thus giving the hapless borrower time to look at a refi if the new adjusted payment warrants that.

    Importantly, one of the servicer's juiciest fee opportunities is now eliminated: forced insurance coverage at an outrageous price when they believed the homeowner’s coverage had lapsed. Now, servicers must notify homeowners twice before charging them the insurance premium and are compelled to cancel the insurance within 15 days when the homeowner proves the insurance was unnecessary.

    The new rules become effective on January 10, 2014.  For Louisville Kentucky and Indiana homeowners who may need personal assistance with these issues, click here.

  • Issues Affecting Buyers and Borrowers at Closing in Louisville Kentucky and Indiana

    Posted Under: Home Buying in Louisville, Property Q&A in Louisville, Investment Properties in Louisville  |  January 8, 2013 4:31 PM  |  281 views  |  No comments

    Issues Affecting Buyers and Borrowers at Closing in Louisville Kentucky and Indiana

    The following is a brief summary of some of the issues buyers and borrowers in Louisville Kentucky and Indiana should be aware of and some timing recommendations – there may be some variations, depending on your closing agent, attorney or lender.

    INSURANCE

    1. Homeowners Insurance. (a) You must bring to closing your homeowner's fire and extended coverage insurance policy or binder (policy) for your new home. The insured amount must be for at least (a) the sum of all new mortgages on your home or (b) its replacement cost. If you are going to rely on the 100% replacement cost, the policy must state that replacement cost is in effect. The policy must name all people who will own the house. Check to see that the mortgage clause adding the mortgagee's insurable interest to all policies is worded in strict compliance with the commitment letter issued your lender.

    One week prior to closing your insurance agent should email, fax or hand deliver to your closing agent's office a copy of a binder for such insurance coverage and proof that the first year's premium is paid in full.

    2. Flood Insurance. The Seller Disclosure should have indicated whether the house you bought is in a within a specially designated federal flood hazard area. Don't rely on this – go to the Jefferson County Kentucky Floodplain Determination site at http://www.lojic.org/flood/user/welcome.htm and check for yourself. If the home is located within flood zone then flood insurance is compulsory – one week prior to closing your insurance agent should email, fax or hand deliver to your closing agent's office a copy of a binder for such insurance coverage and proof that the first year's premium is paid in full.

    3. Rent Loss Insurance. If this transaction involves a loan on investment property then rent loss insurance may be required – check with your lender. If so, then one week prior to closing your insurance agent should email, fax or hand deliver to your closing agent's office a copy of a binder for such insurance coverage and proof that the first year's premium is paid in full.

    4. Title Insurance. Your lender will demand that you purchase for it a Lenders Title Insurance Policy to protect its interest in your home up to the amount of the mortgage. However your title interests are not covered by the lender's policy, so it is highly recommended that you purchase an Owners Title Insurance Policy. Your owner's policy remains in effect for as long as you own the property. It can be purchased within 30 days of closing.

    The owner's policy has a standard form to which riders may be added. Check with your closing agent which policy is best for you and your circumstances. The policy will normally cover matters which were not discoverable by searching the land records. Examples of this include forged documents, the incapacity of a grantor, undisclosed or missing heirs, missing signatures, mistakes in recording, unknown creditors and problems involving access to the land.

    Make Sure You Keep A Copy Of That Policy! There is at least one very large title underwriter which will not honor your claim unless you can produce your policy. The closing statement, proof of payment etc will not suffice. Be warned!

    5. Condominium Insurance. If you are buying a condominium you must provide a Certificate of Insurance naming you and the condominium association and identifying the unit you are purchasing. You may be required to purchase additional insurance under certain circumstances – speak to your lender and your insurance agent and if still uncertain call your closing agent or Realtor.

    TITLE

    Here are some ways title to your home may be held:

    1.  Sole ownership: This form of ownership does apply to Kentucky. It is how a Kentucky individual holds title to real property; it does not apply to property acquired by married couples. However, if a married couple wants to put title in the name of his/her spouse, the deed could state that that spouse is the "sole owner."

    2.  Community property: This does not apply to Kentucky and Indiana, which is not a community property state. However in the 9 community property states in the USA (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) this is one of the primary ways in which couples hold real estate. In these states if a married couple acquires real estate and the deed stipulates that they are married, or if it does not clearly state how they intend to hold title, the law deems it to be a community property. Each spouse then has equal rights in the property and require the written agreement of the other to pass ownership in it.

    3.  Joint tenancy: This ownership form can be chosen when two or more people wish to have equal co-ownership of real estate. The deed then stipulates that the property title is taken by the co-owners as "joint tenants." Each joint tenant has a joint and several interest in the property (own all of it equally) . When a co-owner dies, his/her ownership interest passes automatically to the other co-owners. This is important because ownership passes by law, not by a will. So if there were originally, for example, 4 co-owners, and 3 die, the 4th and last surviving joint tenant ends up owning the entire property. So if one or both of the owners wants to be able to leave his share of the property to someone other than the person he/she co-owns with, joint tenancy should be precluded as a way to hold title.

    4.  Tenants in common: If property is held by two people and it is neither community property nor joint tenancy, then it is a tenancy in common, who are co-owners of the real property. However, unlike joint tenants, they may hold ownership in unequal shares, and each co-owner can pass his/her interest by a will.

    The manner in which title is held has important legal implications and may affect how your property can be disposed of and also tax implications. Also, whatever your intention is regarding the disposition of your real estate after your death, do not rely upon your will to settle that – make sure your deed reflects that intention.

    MISCELLANEOUS

    1. Smoke Detector Ordinance. Depending on the county or city you live in, you or your seller may be required to execute a certification at the closing that the property has the requisite number and type of smoke detectors installed in the correct positions. Check with your realtor or with the fire department. In Louisville, Jefferson County, Kentucky for instance, the seller is required to certify in writing that the smoke detectors are either hard wired into the house or that they are powered by 10m year lithium batteries.

    2.  HUD 1 / Closing Statement. At the end of your closing you will be given a HUD1, otherwise known as a Closing Statement. After the closing, make sure you keep it in a secure place. Knowing where it is, even (and perhaps especially) 10 years later or more, may make the difference between selling your house or not. My previous blog deals with a difficult situation we were faced with last month when closing on a house in Louisville Kentucky.

    The above information above is considered reliable, though not warranted. Laws change. Consult your attorney.


  • Why Is It Dangerous If I loose My Closing Statement?

    Posted Under: Home Buying in Louisville, Home Selling in Louisville, Financing in Louisville  |  January 8, 2013 4:23 PM  |  276 views  |  No comments

    Unreleased Mortgage Discovered.  Two days before the scheduled closing of a New Albany Indiana short sale we'd been working on for 3 months, a new title search was run and a previously undiscovered unreleased mortgage was discovered. Seller swore it had been paid off, but when he looked for his closing statement from that refi, he could not find it. Had he been able to, even though the lien had not been released, that closing statement would have shown that the loan had been paid off and that would have been sufficient proof for the title insurance underwriter to underwrite the loan, enabling the closing attorney to close the current sale. Not only could Seller not find his old closing statement, but he had forgotten the year he had done it in, did not remember the name of the closing office or attorney, could not identify which title company had underwritten the loan, and could not remember which lender he had taken the loan from. A frantic search by Seller eventually produced a document which appeared to indicate the refi had been done some time between 2001 and 2004 with Bank One. Remember Bank One? They no longer exist as they were taken over by JP Morgan Chase in 2004, another complication. 

    Original Lender No Longer In Business.  Calls to Chase were met with stony silence until we managed to contact their Presidents hot line but even then were told we'd have to wait  for an unspecified amount of time, at least 10 – 14 days for the "research team" to get us an answer. That was impossibly long as Bank of America, the foreclosing bank, had given us a drop dead date of 2 more days and the 2nd lien holder Real Time Resolutions was also breathing down our neck.. To be clear: the fault lay absolutely with Bank One / Chase for not having recorded the pay off and not only were they not apologetic, they were highly uncooperative. Don't you love banks: they are required by law in to file a satisfaction of lien (release of mortgage) at the county courthouse within a given time – In Kentucky it's within 30 days of receiving the loan payoff and in Indiana within 15 days of written demand by borrower (See also Ind. Code § 32-29-6-9 : Indiana Code – Section 32-29-6-9: Certificate of release). 

    Way Back When.  Back in the "good old days" before the housing bubble burst, title companies were much more lax in their underwriting and the closing attorney may have, amongst other things, done one of the following to close our sale: (a) used a credit report to show that there is a zero balance on that loan, (b) have the debtor sign an Affidavit stating that he had paid off the loan (c) relied on the fact that no action had been filed against the debtor demanding payment, to conclude that the mortgage had been paid. But today things are much more stringent and we were required to provide hard documents to prove payment.

    Solution.  Metro1 has a secret weapon, my wife Robin. She used to work in Louisville Kentucky for one of the largest international real estate title insurance companies so she understood exactly what we needed to do. We drove down to the Floyd County Recorder’s Office in New Albany Indiana where the very helpful Recorder, Lois Endris, set us up at one of the public computer terminals and within 10 minutes Robin had tracked down the mortgage. However the original mortgage (mortgage 1) had an error in the maturity date so Bank One had issued a new mortgage (Mortgage 2) to correct the maturity date.  When the loan was paid off, Bank One released (Release 1) Mortgage 1 but failed to release Mortgage 2.  So technically the mortgage was not released. Fortunately however, Mortgage 2 specified that its sole purpose was to correct the maturity date of Mortgage 1.  On the advice of Louis we took copies of all the documents to a local Chase branch in New Albany where a very helpful loan officer spent hours helping us. She contacted the national release department of Chase and ultimately we were copied on a fax informing the release department that they needed to issue the formal release.  That document, along with a copy of Mortgage 1, Release 1 and Mortgage 2 was enough to pass through underwriting and our closing went forward and on time.

    Potential Loss. There are other ways to resolve unreleased mortgages. All of them take more time than we had. So how dangerous is it to lose your closing statement? Well in this case it would have meant that the transaction would have failed, the buyer would not have bought the house she'd waited months for, the seller would have had his house foreclosed on, he would not have had his Bank of America deficiency foregiven (a substantial amount), and he would not have received the $8,500 we had secured for him from Bank of America in "walk-away" money. And both listing and selling realtors would have invested large amounts of time for no reward.

    Unreleased mortgages are not infrequent – keep your closing statement in a safe place.

  • Is it True? Do I pay a 3.8% Tax On Real Estate Sale Under New ObamaCare?

    Posted Under: Home Selling in Louisville, Financing in Louisville, Home Ownership in Louisville  |  December 31, 2012 10:25 AM  |  311 views  |  No comments
    According to Greek mythology, Heracles' 2nd task was to destroy the Hydra by cutting off its multiple heads, even though as soon as one head was cut off it was replaced by two more. Would even Heracles have been able to destroy the 3.8% tax myth created by opponents of ObamaCare? It seems as soon as one purveyor of the distortion is discredited, 2 more spring up in their place.

    The Myth
    I particularly like the irony of the "facts" in the Blaze TV website because of their slogan: "Where The Truth Lives" and their url:knowledgecreatespower.blogspot.com. Here's what they had to say in one of their articles:

    "Did you know that if you sell your house after 2012 you will pay a 3.8% sales tax on it? That's $3,800 on a $100,000 home, etc. When did this happen? It's in the health care bill, and it goes into effect in 2013. Why 2013? Could it be so that it doesn't come to light until after the 2012 elections? So, this is "change you can believe in?"

    Under the new health care bill all real estate transactions will be subject to a 3.8% sales tax. Now you tell me, what does real estate tax have to do with your healthcare?"

    The Facts
    Here's what this new tax isn't:
    " It isn't a sales tax and it's not a real estate transfer tax
    " It will not apply to the sale of a $100,000 house
    " It will not apply to all real estate transactions and it isn't only on real estate transactions

    Here's what the new tax is:
    " It is a 3.8% Medicare surtax
    " The tax is on the lesser of (a) net investment income and other non-wage income, starting in 2013, including investment income on interest, dividends, capital gains, annuities, rents, royalties and passive activity income and does not include income from active trade or business income, OR (b) the excess of "Modified Adjusted Gross Income" (MAGI) over the "threshold amount". The "threshold amount" is $250,000 or more for married taxpayers and $200,000 for other taxpayers.

    So, for the most part, if you are married with an income of under $250,000 or single with an income under $200,000 this tax will not apply to you. That's about 95% of US taxpayers

    Real Estate:
    As it relates to real estate, this new surtax provision must be read in conjunction with Title 26-Internal Revenue Code § 121, Exclusion of gain from sale of principal residence. Under Section 21 a married couple who sell a personal residence can exclude the first $500,000 in profit from tax ($250,000 for singles). That would be profit from a home sale, not proceeds. So a couple, regardless of their income, who bought a house for $100,000 and sold it for $599,000 would owe no tax, even under the health law.

    Examples
    1. Sam, single, has $100,000 of salary and $50,000 of net investment income.
    o The 3.8% surtax would not apply because it is less than the MAGI $200,000 threshold.

    2. Sally, single has $225,000 of net investment income and no other income.
    o The 3.8% surtax would apply to $25,000 of income which is the excess over the $200,000 MAGI "threshold amount" ($225,000 - $200,000). $25,000 x 3.8% = $950 tax.

    3. Martin and Mary, married filing jointly, have $300,000 of salaries and no other income.
    o The 3.8% surtax would not apply because their income is derived from "active trade or business" and not from "net investment income".

    4. Malcolm and Misty, married filing jointly, have $400,000 of salaries and $50,000 of net investment income.
    o The 3.8% surtax would apply to $50,000 of net investment income (lesser of rule). $50,000 x 3.8% = $1,900 tax.

    5. Mel and Monica, married filing jointly, have $200,000 of salaries and $150,000 of net investment income.
    o The 3.8% surtax would apply to $100,000 of income, derived as follows:. $200,000 + $150,000 = $350,000 - $250,000 = $100,000. This is an application of the "lesser of" rule where the $350,000 MAGI is deducted from the $250,000 "threshold amount". $100,000 x 3.8% = $3,800 tax.

    Conclusion
    The most insidious obfustications contain a sliver of truth. This particular misinformation campaign was easy to create and spread because net investment income may include profits from the sale of a house (but under certain very limited circumstances). And it has been difficult to dispel because of the large number and high visibility of those who have spread it, including, for instance, Bill O'Reilyand South Texas Congressman ,Todd Hunter

    Other Resources
    For a fuller and more detailed explanation of this tax and its implications go to the American Institute of CPAs website. See also the Wall Street Journal, and Forbes Magazine

  • Louisville Market Shrinking - Good News For Sellers - Not Yet Too Late For Buyers

    Posted Under: Market Conditions in Louisville, Home Buying in Louisville, Home Selling in Louisville  |  August 15, 2012 2:10 PM  |  307 views  |  No comments
    Past Market Trend
    Back in April I wrote that there were 3 data pieces which, read together, indicate strongly that as of April 9, 2012, the Louisville housing market is improving for sellers:
    1. The median list price is trending strongly upward
    2. The asking price per square foot is trending strongly upward
    3. The average number of days on market is trending sharply downward
    and predicted that the market would continue to improve for sellers except maybe in short sale and REO prone neighborhoods in Louisville, Kentucky. http://metro1realty.com/latest-housing-trends-and-market-statistics-for-louisville-kentucky-4-9-2012

    Current Market Trend
    Turns out that prediction was accurate. Here's the latest graph from a National research company showing how the inventory of homes for sale has shrunk in Louisville. This, together with record low interest rates, high rental occupancy rates of betwen 93-97%, so it is now much cheaper to buy than rent, has lead to an improved market for sellers and buyers are now less able to snap up bargains that were so readiliy available as little as a year ago. 

    Graph Showing Shrinking Inventory of Homes for Sale in Louisville, Kentucky

     

    Other Currennt Data Indicating Buy Signals
    1. Asking price is trending strongly upward
    2. Average days on market has dropped since April from 177 to 167, though trending up right now
    3. The number of buyers relative to the number of houses available is increasing.
    This is still not a Sellers market but it is trending thast way, but Sellers are tending to hang on to their homes rather than sell low. 

    Knowledge is Power - Make an Informed Decision
    To keep current with market trends in the Louisville, Kentucky market, you may follow me on Trulia or visit my blog from time to time at http://metro1realty.com/metro-1-blog
  • I need outdoor paint advice, please

    Posted Under: Remodel & Renovate in Louisville, In My Neighborhood in Louisville, Property Q&A in Louisville  |  August 5, 2011 1:19 PM  |  422 views  |  No comments
    I love outdoor projects, but have been "blessed" with 2 left hands. Hammers are drawn by gigantic electro-magnetic forces to my thumbs. Puting in a light bulb is a half hour ordeal. If you want to catch up on exoctic curse words, drop by when I'm puting together a build it yourself cabinet.

    So last year when I set out to paint the out-door well pump that is a left over from the glory days when my property was part of a large farm, my family smiled politely, gave each other knowing looks, patted me sympatheitically on the back and sat back to watch me screw up.  I did not disappoint.

    Here are 2 links to my pump project:
    http://www.youtube.com/watch?v=1Mj5QRy-lxE

    http://www.youtube.com/watch?v=EY0MIntdG7w

    Well one year later and that brilliant pink is but a faded, blotchy memory, nothing like the vibrant color I was looking for.  And, as usual, I have no idea where I went wrong!

    Does anyone know where I can find a really good vibrant outdoor paint that can survive my special talents? Suggestions welcome.
 
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